Tim Wojs

Tim Wojs asked what factors contributed to the Consumer and Professional Products (CPP) segment's better-than-expected sequential EBITDA performance in the quarter. He also sought an update on tariffs and sourcing strategies, inquiring about the specific drivers for the implied $5-$10 million EBITDA growth on flat sales in CPP for 2026, particularly how tariffs are being absorbed.

Answer

Brian Harris, EVP and CFO, attributed the better CPP performance to favorable price index and slightly better volume than anticipated. He explained that the 2026 guidance reflects current tariff policy, with mitigation through global supply chain leverage, cost management, supplier negotiations, and pricing. He noted that the global supply chain would drive a 100 basis point margin improvement year-over-year. Ron Kramer, Chairman and CEO, added that 85% of the business is unaffected by tariffs and reiterated a long-term target of 15% margin for CPP, with 10% targeted for 2026.

Tim Wojs inquired about what factors contributed to the Consumer and Professional Products (CPP) segment's better-than-expected performance in the quarter, specifically why EBITDA was up sequentially instead of weaker as previously implied. He also asked for an update on tariffs and sourcing choices for CPP, and the specific drivers for the implied $5-$10 million EBITDA growth on flat sales in 2026 while absorbing tariffs.

Answer

Brian Harris, EVP and CFO, attributed the better CPP performance to a favorable price index and slightly better volume than originally anticipated. Regarding tariffs and sourcing, he stated that the current tariff policy is reflected in the guidance, and Griffon expects to mitigate impacts through its global supply chain, cost management, supplier negotiations, and pricing. The asset-light model enables leveraging the global supply chain for high-quality products. He noted that the continuing use of the global supply chain will contribute to a 100 basis point margin improvement year-over-year. Ron Kramer, Chairman and Chief Executive Officer, added that volume leverage will come with consumer normalization, reiterating a long-term target of 15% for the business, and emphasized that 85% of their business is not tariff-related.

Tim Wojs inquired about the current lead times for the Oklahoma business relative to normal levels and the company's communication strategy and preparation for potential order pull-forward ahead of the Tulsa ERP conversion in 2026. He also asked about the responsibilities and contributions of the newly hired COO. Finally, he requested a quantification of expected free cash flow for the fourth quarter and the DDNA number for AAON in 2026.

Answer

CEO Matt Tobolski stated that Oklahoma segment lead times are about 50% higher than desired, with a focus on increasing production to reduce them. He emphasized a substantially more proactive communication strategy for the Tulsa ERP go-live, leveraging lessons learned from Longview. Matt Tobolski explained that the new COO, Roberto, brings expertise in managing consistency, lean manufacturing, and driving best practices across all five facilities. CFO Rebecca Thompson did not quantify Q4 free cash flow but indicated it would be significantly positive due to collecting delayed billings. She provided DDNA guidance of $75 million-$80 million for 2025, with an additional $20 million-$25 million in 2026.

Tim Wojs asked about the current lead times for the Oklahoma business relative to normal levels and how AAON plans to communicate the upcoming Tulsa ERP conversion to the channel to prepare for any potential order pull-forward. He also inquired about the responsibilities and contributions of the newly hired COO, Roberto. Lastly, Tim Wojs requested a quantification of expected free cash flow for the fourth quarter and the projected DDNA (Depreciation, Depletion, and Amortization) for AAON in 2026.

Answer

CEO Matt Tobolski stated that Oklahoma lead times are about 50% higher than desired, with a focus on increasing volume to reduce backlog. He emphasized a more proactive communication strategy for the Tulsa ERP go-live, incorporating lessons learned from Longview. Matt Tobolski highlighted the COO's role in managing consistency across AAON's five facilities, driving lean manufacturing, and improving visibility, leveraging his experience with many facilities. CFO Rebecca Thompson did not quantify Q4 free cash flow but expected it to be significantly positive due to delayed billing collections. She projected 2025 DDNA at $75M-$80M, with an additional $20M-$25M increase in 2026.

Tim Wojs asked about the performance of volumes relative to expectations, seeking a breakdown of volume impact from tariffs and observed price elasticity. He also inquired about the expected continuation of the one-for-one trade-off between price and volume in the coming quarters.

Answer

President and CEO Chris Nelson stated that volumes were relatively in line with expectations, with some tapering towards the end of Q3 due to a non-standard promotional window. He anticipates a similar environment in Q4, with a return to a more normal promotional calendar for the holiday season, noting the environment is challenging but stable.

Tim Wojs asked about the performance of volumes relative to expectations, seeking a breakdown of the impact from tariffs versus price elasticity, and inquired about the anticipated price-to-volume trade-off in the upcoming quarters.

Answer

Chris Nelson, President and CEO, stated that volumes were largely in line with expectations, with some tapering towards the end of Q3 due to a non-standard promotional window. He noted Q4 would return to a normal promotional calendar and described the environment as stable but challenging.

Tim Wojs from Robert W. Baird & Co. requested details on how recent pricing increases are tracking against expectations, including any observed demand elasticity and the outlook for pricing in the second half of the year.

Answer

COO, EVP and President of Tools & Outdoor Christopher J. Nelson confirmed the initial price increase was implemented as planned with no significant change in demand patterns, noting a roughly one-for-one price-to-volume elasticity. He announced a second, more modest price increase is planned for early Q4. CFO Patrick D. Hallinan added that the Tools & Outdoor segment would see a high-single-digit price benefit in the back half, offset by a similar volume decline.

Tim Wojs asked about the impact of destocking in the third and fourth quarters of 2025 and whether Carlisle Companies Incorporated expects to enter 2026 with clean channel inventory.

Answer

Chris Koch, Chair, President, and CEO, explained that Q4 and Q1 are typically the lightest quarters with normal seasonal inventory reductions. He noted that the Q4 market survey indicated normal seasonal patterns (1.5 to 2 months) for destocking, with a 'little bit more' due to M&A turmoil at certain distributors. He anticipates this could be a positive for Q2 2026 if macroeconomic issues and new construction demand improve.

Tim Wojs from Baird inquired about the impact of destocking in the third and fourth quarters, the factors driving channel partners' destocking activities, and whether Carlisle anticipates entering 2026 with normalized channel inventory levels.

Answer

Chris Koch, Chair, President, and CEO of Carlisle Companies Incorporated, explained that Q4 and Q1 typically see normal seasonal inventory reductions. He noted that while there might have been slightly more destocking due to M&A integration turmoil at certain distributors, overall, no major impact was observed. Koch suggested that if macroeconomic issues resolve and new construction demand improves in 2026, a clean slate could be a positive for Q2.

Tim Wojs inquired about the primary drivers for Simpson Manufacturing Company's recent cost reductions, specifically whether it was due to an expectation of a prolonged slower housing market. He also asked about the timeline for tariffs to fully impact gross margins, any noticeable effects from the new Gallatin facility, and the company's volume trajectory expectations for early next year.

Answer

Mike Olosky, President and CEO, confirmed that the cost reductions align with expectations of a slower market, noting a deceleration in the second half of the year and a projected flat market for 2026. Matt Dunn, CFO, added that these actions aim to maintain the 20% operating margin ambition. Mr. Dunn stated that the Gallatin facility would not have a noticeable short-term impact on gross margins, and that tariffs, primarily affecting concrete products, are expected to cause gross margin erosion over the next couple of quarters, with about 80% already reflected in Q3. Mr. Olosky indicated that Q3 North American volume was down 2.7% versus the prior quarter, with a worsening trajectory, but reiterated the ambition to outperform the market.

Tim Wojs asked about the primary drivers for Simpson Manufacturing's cost reductions, the expected trajectory of gross margins, when tariffs are anticipated to fully flow through, and any noticeable impact from the new Gallatin facility. He also inquired about the volume trajectory in North America and the expectation for outperforming market declines, later following up on carryover pricing for 2026, the Q4 EBIT margin guide, and clarifying the $30 million annualized savings.

Answer

CEO Mike Olosky stated that cost reductions are a response to the market slowdown and an anticipated flat year in 2026, aiming to maintain the 20% operating margin. CFO Matt Dunn added that the Gallatin facility won't have a noticeable short-term gross margin impact, with tariff impacts primarily affecting concrete products and expected to fully flow through by Q1 2026, with 80% already reflected in Q3. Mr. Olosky noted North American volume was down 2.7% in Q3 versus the prior quarter, with a year-to-date decline of 1.4%, indicating a worsening trajectory, but reiterated the ambition to grow above market. Regarding pricing, Mr. Olosky mentioned $100 million in annualized tariff-specific price increases and $50 million for U.S.-made products. Mr. Dunn detailed $30 million in Q3 pricing, an estimated $25 million in Q4, and $30-35 million carryover into 2026. Mr. Dunn indicated Q4 EBIT margin variability largely depends on volume. Both executives confirmed the $30 million annualized savings are in addition to severance costs.

Tim Wojs inquired about the International segment's Price, Productivity, Inflation, and Investment (PPII) turning negative this quarter, asking if it was a timing issue or indicated underlying concerns.

Answer

President and CEO John Stone clarified that while PPII was slightly negative in Q3, the year-to-date figure for the International segment is essentially covered (approximately negative $1 million). He advised against over-interpreting the Q3 figure, suggesting that the year-to-date rate provides a better indication of their success in managing inflationary pressures.

Tim Wojs asked about the evolution of spec content, comparing current trends to three years ago, particularly regarding electronics adoption and the impact of recent ancillary product M&A. He also inquired about the International segment's PPII (price, productivity, inflation, investment) turning negative in Q3, asking if it was a timing issue or indicative of broader trends.

Answer

President and CEO John Stone highlighted accelerating electronics adoption in specs and the positive impact of new non-residential product launches. He noted emerging opportunities for complementary software in multifamily applications and the strong fit of recent acquisitions like Krueger Specialty Products and Trimco with Allegion's spec engine. Regarding International PPII, Mr. Stone clarified that the Q3 negative figure was minor, and on a year-to-date basis, inflationary pressures have been essentially covered, suggesting it was not a significant trend.

Tim Wojs from Baird asked about key milestones for integrating Acuity Intelligent Spaces (AIS) components like QSC, Distech, and Atrius into a more comprehensive solution. He also sought clarification on the low single-digit sales growth guidance for Acuity Brands Lighting (ABL) in fiscal 2026, specifically regarding the impact of pricing actions related to tariffs, and the implied adjusted EBIT margin for the company.

Answer

Neil Ashe, Chairman, President, and CEO, Acuity, outlined milestones for AIS, including continued organic development of each business, commingling of products, and future end-user recognition of new capabilities. Karen Holcom, SVP and CFO, Acuity, explained that ABL's strategic pricing actions, in the low to mid-single digits, aimed to offset the dollar impact of tariffs. Mr. Ashe highlighted the dramatic margin improvement in the lighting business and new segment-level margin disclosure.

Tim Wojs of Robert W. Baird & Co. asked for an assessment of channel inventory levels for the Attachments segment compared to historical norms, the drivers of favorable mix in the Solutions segment, and the magnitude of price realization.

Answer

President and CEO Mark Van Genderen described company-owned inventory as being in 'very, very good shape.' He noted dealer plow inventory has improved and is close to ideal, while hopper and spreader inventory is right where it should be. EVP & CFO Sarah Lauber explained the favorable mix in Solutions was driven by specific, higher-margin municipal contracts in the first half. She also confirmed that price realization for both segments is in the low single-digit range.

Tim Wojs of Baird inquired about the financial impact of reversed aluminum tariffs and the company's strategy for potential future tariffs. He also asked about the backlog conversion rate and sought an update on the vinyl product ramp.

Answer

Executive Santiago Giraldo confirmed the company will receive a full refund for paid tariffs in Q4 and stated that future tariffs would likely be passed on to customers. He also explained that backlog conversion is extending due to larger projects but that growth is still expected. He noted the vinyl product ramp is progressing with a full product line now available and should be a meaningful contributor next year.